We're getting a bit off topic.
How exactly one dominant mobile OS whatever it might be will impact handheld gaming business more than rampant mobile gaming growth in past years already did?
Because there are better quality products on the iPhone right now than there ever were on all the other piecemeal phones and OSes?
The reason that mobile gaming hasn't impacted handhelds is that there really hasn't been a definitive way to compare handhelds against mobiles. Mobiles have been very different from handhelds in form factor, game quality, distribution channels, and title offerings. Its been a very disconjoined market, which means that although there is a lot of money in it, there isn't a way for most developers to put out AAA content onto a large number of phones.
I would compare it to retail store revenue vs. Wal-Mart and the other big-box retailers. There was always huge amounts of money in retail for many years. However, it was always distributed between hundreds of thousands of smaller retailers, which couldn't offer discounts or a large range of goods. Enter Wal-Mart, Target, Meijer and CostCo (and the rest). They de-balkanized the market. The money was still there and growing, but the earnings amalgamated into fewer stores....Which meant that those that sold products through said stores would earn more money, and raise gross revenue.
Likewise, mobiles are the same way. Right now, there is $3-5 billion USD in mobile gaming between 100's of OSes and handsets. What happens when that same $3-5b (and growing) is between 5 OSes and hundreds of handsets? Then it becomes more lucrative for major game companies to be in that market, providing better games that will compare to DS titles. Again, that is why we're seeing more DS and PSP quality games on the iPhone, which are selling very well. For example, Grand Theft Auto: Chinatown Wars on iPhone has outsold the PSP version, and may outsell the DS version. Don't you consider that a threat to the DS's future lineup of games?
What Mr. Stickball said above is basically the point. Before I had an iphone I more or less never bought the crappy apps that would run on my Samsung except maybe a really low quality Jamdat blackjack program here or there. Gaming on mobile was a horrible joke before the iphone. Now there are really only two major platforms in the US that include gaming, the iphone and Android, where before there were thousands of really low quality phones running Symbian that made up the market
Today iphone and ipod games like mirrors edge or need for speed shift are vastly superior to DS games graphics wise and better then the PSP on a case by case basis. They have advanced levels, many hours of gameplay (there was a Zelda type game called Zenonia which is at least on par with classics like a link to the past and has over 30 hours of gameplay for under 10 bucks). I mean they ported the entire Dragon's Lair laserdisk arcade game from the 80s to the iphone and it looks amazing. It's the entire game from the arcade plus a bunch of extra features. These games are both on mobiles AND on newer ipods which cost less then the DS in many cases (plus the millions of other features the ipod touch has the DS does not have).
In short old mobile phone gaming was supplementary to handhelds because it more or less sucked. It was entertainment of last resort, like games on the original ipods like breakout.
Today mobile phone gaming is equal or in some cases superior to dedicated handheld gaming. Chinatown wars on the iphone is the same as the DS game (with slightly better graphics, more radio stations etc) AND instead of 30 bucks its 10, plus instead of being something you have to go to the store to buy (and pay tax on) its tax free and instant over the iphone network.
This isn't just a big part of the future for mobiles either, microtransaction gaming is big on consoles too (just look at games like Braid, megaman 9 and others available as PSN and Live downloads) so there are ton of great small games being developed that can go right to the iphone in addition to the 360 and PS3. Look at games like Peggle or Plants vs Zombies for some examples. I cannot think of a single DS game that is more fun pound for pound then plants vs zombies, and I mean that in all seriousness. Ditto for Nova, Mirrors Edge and others especially given the 10 dollar or less price point vs 30+ for DS games.
I think the only part mrstickball and myself disagree on is the open vs closed platform part. I would argue that with mobiles people have a much lower tolerance for incompatibilities and crap. Everyone whos ever used a windows computer has experienced the blue screen of death, a driver incompatibility, a virus and a million other headaches. Because the PC is a complex tool many people shrug and say its par for the course, and keep buying new versions of windows.
Having the same malware crap and incompatibilities infest a mobile phone is vastly different. It's a smaller simpler device that seems like it should just work, so it not working is not at all par for the course. Additionally losing a computer doesn't mean you lose your lifeline to the outside world (no calls, no texts, no on the go facebook) so it doesn't feel like its as big a deal if it goes down for a while, the mobile phone is much more vital and so the need for ironclad reliability is more important.
In that way I would say its more like the console market then the wild west PC market where people are willing to give up a degree of control for ease of use. How many of you stopped buying the 360, PS3 and Wii because the manufacturer of the console had final say on games and restricted your access to extra features (I mean the 360 doesn't even give you a browser or any kind of internet beyond buying games online if you don't shell out 50 dollar a year gold fees)?
Why has an open source console not come along over the last 30 years and taken over the market? I would contend that phones are a similar beast where being able to do anything you want with the phone is a narrow concern of a certain type of uber geek that makes up less then 5% of the population while most people just want it to work and want it to be easy. I'm fine with debugging my computer, but I sure don't want to worry about running a task manager or dealing with a kernel panic on my phone and I'm geekier then most. If my mom got hit with task manager issues she'd just return it thinking its broken.
As a final thing normally the way the out there third party would win is on cost, they would just make Android phones cheaper then the iphone, but Apple knows that game from macs and the 80s and now they dominate on price. The ipod was always price competitive, the iphone has been as low as 99 bucks. How do you significantly price cut enough with lower production numbers on more phones to beat 99 bucks?
The big reason Apple lost in the 80s and 90s is a mac was 2000 dollars while a crappy windows or DOS box was under 1000, half the price. There is no way Apple will let themselves get undercut on price like that ever again, and with iad, their cut from the itunes store and all the rest they have plenty of back end revenue so they will have no problem beating anyone on up front hardware cost for years to come.